Budget Curtails French Spending, Retains Programs

Nine months have passed since a group of senior French officials, lawmakers, European Union leaders and a couple of British and German diplomats began drafting a new defense strategy aimed at keeping France's armed forces relevant amidst the nation's looming debt crisis.

Unveiled April 29, French President Francois Hollande's revised road map upholds many of the strategic goals set in 2008 by his conservative predecessor, Nicolas Sarkozy, albeit squeezed into a budget envelope befitting the nation's constrained fiscal environment. The 160-page document proposes flat spending through 2019 at current-year levels of €31 billion ($40 billion) per year, marking a decline in real terms when inflation and the one-time sale of state-owned assets are factored in.

In remarks accompanying the release of the white paper, Defense Minister Jean-Yves Le Drian said budget details will follow this summer in the form of a new military program law (LPM). But for now, the French strategy appears to reduce costs by stretching out major development and procurement programs, rather than canceling them outright.

The white paper also calls for cutting more than 24,000 of France's roughly 285,000 military and civilian jobs by the end of the decade, a reduction that would come on top of 54,000 job cuts initiated in 2008 under Sarkozy.

With a proposed topline of €179 billion over five years, the Socialist government's spending priorities emphasize maintaining the nation's sea- and air-launched nuclear deterrent and supporting France's reintegration into the NATO unified command—a process begun under then-President Jacques Chirac and advanced by Sarkozy in the 2008 strategy, despite criticism from the left.

The document also puts renewed focus on space and airborne intelligence gathering, aerial refueling and troop transport—three capability areas in which France came up short earlier this year during Operation Serval, the intervention it led against Islamic rebels in Mali.

“Our defense is, in many ways, in a difficult situation, but we have an ambitious project, developed in recent months with the twofold aim of combining the interests of France and the effectiveness of its defense,” Le Drian said.

The updated strategy paper comes as France and other major defense powers in Europe face declining defense spending in light of fiscal constraints. Like France, the U.K. is reassessing its military force structure to more closely align with budget realities. As Europe's two biggest defense spenders, both nations are struggling to remain relevant as the U.S. turns its strategic focus to the Asia-Pacific, and countries such as Brazil, Russia, India and China boost defense equipment purchases.

Overall, the defense chief says, budget reductions in France and in the rest of Europe will have a major impact on the nation's industry, much of which is concentrated in several regions. Overcapacity in Europe—coupled with contraction of the national and European market for military hardware—is occurring at a time when international competition is exacerbated by the U.S., where budget pressures are leading industry to redouble efforts in exports. Russia and certain emerging countries vying for a presence on the world market contribute to the diminution of outlets.

As expected, the 2013 road map is shot through with calls for more European harmonization, incorporating for the first time input from consultations with the European Union, Britain and Germany. Weakened defense spending among European governments, including some whose defense outlays have dropped below 1% GDP, makes more urgent the need to pool resources to save money, though it is unclear whether France will be able to enlist other nations in these efforts.

In space-based Earth observation, for example, despite years of negotiations, European governments have been unable to come together on a ground network that could pull information from various nations' radar and optical satellites.

As was the case in the previous white paper, Hollande's strategy calls for renewed attention on space-based electronics intelligence. However, a program called Ceres, first proposed in 2008, has gone nowhere, mainly because France has been unable to win the support of any other European government for the project.

In addition to space-based intelligence, the document calls for a “mutualization” of efforts to deploy and exploit surveillance drones with European partners. Le Drian says theater and tactical drones will be purchased off the shelf at first, but eventually be replaced by a European development effort.

While unmanned aerial vehicle (UAV) developments have been long-delayed in France, Le Drian vows they will be given a new push, though the extent remains to be seen. In his remarks he touted Franco-British defense cooperation initiatives outlined under the 2010 Lancaster House agreement, which so far has included Anglo-French military exercises and joint development of new hardware, and has enabled the allies to work closely in Libya and Mali. Although the agreement includes provisions for bilateral drone development, since taking office a year ago Le Drian has signaled an interest in expanding the cooperation to include other European governments.

In the meantime, as Paris grapples with its spending crisis, Le Drian foresees applying several billion euros in proceeds from the sale of state-owned assets—mainly property—to the nation's defense coffers. However, this one-time cash infusion will not be repeated, painting a slightly less rosy picture for defense spending beyond 2014.

In addition, the white paper says defense planners will now be required to consider the total cost of ownership of capital investments—a response to an unexpected €3 billion shortfall between 2009-12 due partly to equipment purchases which did not account for total life-cycle costs.

The French defense ministry says this gap was at risk of increasing considerably in budget forecasts for the coming years. However, “this white paper puts an end to the funding gap that had grown between the forecasts embedded in the previous LPM and current financial perspectives.”

The document appears to shelve plans for building a second aircraft carrier and to reduce purchases of DassaultRafales over the life of the program. The defense strategy calls for a total of 225 fighters for both air and naval forces. France had previously targeted a purchase of 286 Rafale combat jets, in addition to its fleet of Mirage 2000s.

The strategy also pares back a planned buy of AirbusA330 Multirole Tanker Transport aircraft to 12 from 14, identifying aerial refueling as a capability where assets could be pooled among European governments. A plan to field 10 medium-range air defense systems also met the chopping block, reducing the number to eight.

On the drone front, the document provides some clarity, calling for the purchase of 12 UAVs for theater surveillance, along with an unstated number of light aircraft for intelligence, surveillance and reconnaissance missions and a new generation of targeting pods.

France also expects to maintain 50 tactical transport and seven surveillance aircraft—including four AWACS (airborne warning and control system) and three E-2C Hawkeye maritime patrol aircraft.

Cyberdefense will be given a higher priority in the new road map than it saw under Sarkozy, and special forces will see additional resources to increase the size of the French joint special operations command.